Shares of American Tower
How it got here
As the market for wireless services has expanded, so has the need for tower space. That's been a boon for American Tower, which rents tower space to wireless providers around the world.
The stock's rise has been driven by the company's continually improving performance financially. In the first quarter of 2012, revenue rose 23.8% to $696.5 million and cash flow from operations jumped 41.6% to $402.0 million.
Its stock has had a great run since 2009, closely matched by infrastructure provider Crown Castle International
Let's take a look at the some of the group's current valuation, capital efficiency, and balance-sheet metrics.
Return on Assets
|American Tower||7.8||5.6%||$7.3 Billion||34.0|
|Crown Castle International||6.2||4.2%||$8.4 Billion||55.7|
Source: Yahoo! Finance.
The company recently converted to a REIT, which will mean regular distributions to shareholders, although it's a relatively modest 1.2% right now. If cash flow continues to improve, the payout will go up as well.
Can the rally continue? I have my doubts. A 34 forward P/E ratio is expensive, and American Tower will have to continue to grow rapidly just to live up to expectations. One slip-up and the stock could take a nasty fall. I like to have upside risk in my investments instead of buying perfection and risking the downside.
The CAPS community, however, has a different opinion. The stock has a four-star rating, and 152 out of 167 All-Stars think the stock will outperform the market as it continues to capitalize on the revolutionary growth in mobile.
American Tower's growth and stock performance have been impressive, but I don't think it can fly much higher. The company can't squeeze too much out of customers because they could just build their own towers, and with the stock priced the way it is, I don't see much value.
Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. Motley Fool newsletter services have recommended buying shares of American Tower. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.